I haz idea!

I was thinking about this article by Joe Nocera that The Klown discussed yesterday. This is the part I want to talk about:

But if we could just stop playing gotcha for a second, we might realize that federal loan programs — especially loans for innovative energy technologies — virtually require the government to take risks the private sector won’t take. Indeed, risk-taking is what these programs are all about. Sometimes, the risks pay off. Other times, they don’t. It’s not a taxpayer ripoff if you don’t bat 1.000; on the contrary, a zero failure rate likely means that the program is too risk-averse. Thus, the real question the Solyndra case poses is this: Are the potential successes significant enough to negate the inevitable failures?

I have a hard time answering “no.” Most electricity today is generated by coal-fired power plants, operated by monopoly, state-regulated utilities. Because they’ve been around so long, and because coal is cheap, these plants have built-in cost advantages that no new technology can overcome without help. The federal guarantees help lower the cost of capital for technologies like solar; they help spur innovation; and they help encourage private investment. These are all worthy goals.

To say “no” is also to cede the solar panel industry to China, which last year alone provided some $30 billon in subsidies for its solar industry. Over all, the American solar industry is a big success story; it now employs more people than either steel or coal, and it’s a net exporter.

But solar panel manufacturing — a potential source of middle-class jobs, and an important reason the White House was so high on Solyndra, which made its panels in Fremont, Calif. — is another story. Not so long ago, China made 6 percent of the world’s solar panels. Now it makes 54 percent, and leads the world in solar panel manufacturing. Needless to say, the U.S. share of the market has shrunk. The only way America can manufacture competitive solar panels is to come up with innovative technologies that the Chinese can’t replicate. Like, for instance, Solyndra’s.

Let’s assume for the sake of argument that Nocera is correct and the government should be investing in “innovative technologies.” Is the best way to do that giving out loans at rock-bottom interest rates? Even if everything goes right all we get is our money back.

What if we did it the way most investors do and bought stock in the companies? Then if the company flops we would lose money (which we would anyway) but if it succeeds we could realize a profit. The profits from the investments that succeed would offset the losses on the ones that fail.

As stockholders we would not only have rights we would also have a say in management decisions. We could appoint a trustee with expertise in that field and no personal financial interest to act as our representative. This person would have to report to both the White House and Congress.

What do you think?

About Myiq2xu - BA, JD, FJB

I was born and raised in a different country - America. I don't know what this place is.
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28 Responses to I haz idea!

  1. WMCB says:

    I think it’s an interesting idea, but I have come to believe, after watching so many well-intentioned ideas go so wrong over the years, that govt and industry need to get out of bed with each other – PERIOD.

    I used to be mildly in favor of the idea of certain “private/public partnerships”, etc, but I have changed on that. It does not matter if the industry is one I “like”, or one I don’t. I have yet to see it not lead to corruption and cronyism and manipulation of outcomes that profited the well-connected companies vs. the most economically viable ones.

    If the govt wants to invest in clean and alternative energy, then it needs to be done as a pure govt research program. Fully funded and controlled by the govt, no corporations involved. THEN, if there are promising results from it, the private sector can take that new knowledge and run with it to make actual products and get them to market.

    I want a fucking wall of separation between Corp and State. Let govt do what it does best, and business do what it does best, and never the twain shall meet.

    • 1539days says:

      That’s what the NIH does in terms of medicine.

    • ralphb says:

      Back to the future. That’s the approach that was taken forever, until the privitization schemes of the ’80s. All the great things that came from NASA took just that route.

    • votermom says:

      I agree. Money-making schemes attract crooks like flies to sh*t.

      Govt should invest in research where the goal is finding answers, not turning a profit.

    • Dario says:

      I want a fucking wall of separation between Corp and State. Let govt do what it does best, and business do what it does best, and never the twain shall meet.

      WMCB, your point is good, except, the government has been intervening, making winners and losers along the way. The railroads could not have been built without the government’s involvement. The government involvement to help industries that it sees as beneficial for the common good is as old as the Revolutionary War, such as canals, railroads, and other industries. You may disagree with the government helping industry A or B, but you are not different from those who have always disagreed with government intervention. Our railroads are almost relics because the government decided that highways were the way to go.

      • 1539days says:

        Interstate commerce has always been the purview of the Federal government. It’s when the federal government interferes with individual state business where its overreaching.

  2. Mary says:

    OT: Economic team on This Week (included Goolsbee) said if Greece goes under, what we will face may worse than the Lehmann failure in 2008—just on a global scale.

    Tad scary.

    • 1539days says:

      When the collapse of an interconnected but not integral part of your economy could take down your economy, it means that there are fundamental problems. Our problem as a country is that we still hold a lot of debt. Even if we don’t need to worry about debt, we can potentially lose a customer base as well.

      Personally, I think er need a good old fashioned panic. It would be over fast and hard instead of this death by a thousand cuts of a lost decade.

      • ralphb says:

        I worry about AIG type problems more than anything now. Then there is the lost market problem. Both could be a disaster for us and make 2008 look mild in comparison.

  3. Jeffhas says:

    Let the companies that want/need that technology license it from the Government – like the Telcoms license spectrum – let the bidding begin…. this does open up another area of cronyism, bribery and chicanery – but at least the government brings money IN.

    • WMCB says:

      Jeffhas, once the govt research program came up with some promising ideas, then leasing the patents could be a way to recoup those research dollars.

      It would still have to be watched very closely, so as to avoid no-bid selling of the things to favored cronies, but that approach would be safer than handing taxpayer dollars to various companies like Solyndra.

  4. DeniseVB says:

    I see what you’re saying, but would it up the ante for more pay-for-play donors? For any party? I think that’s where the big stink over Solyndra and LightSquare is coming from.

    I hated it with Bush, I hate it now. Fix the people first, health, education, safety and welfare….that’s how I want my tax money spent 🙂

  5. Murphy says:

    If we build a solid wall between industry and government how do we compete with manufacturing countries, like ChIna, that subsidize their nascent industries with billions and billions?

    • ralphb says:

      Not just China. Germany, France and the other EU countries also subsidize their old, as well as, their new industries. That’s just one of the problems with free trade as currently practiced.

    • WMCB says:

      Well, I don’t think the position that “we must do what China does in order to compete with China” is the way to go.

      One could as easily ask “If we don’t massively pollute our rivers and air, ignore safety issues and working conditions, and pay slave wages, how will we ever compete with China?”

      There are things we could do to correct our problems with China, if we had the balls. One would be penalizing them for the currency manipulation that is a huge part of the problem.

  6. 1539days says:

    More “risk is our business.” Guess what? China doesn’t deal in risk. They are bulk producing the same old (proven) solar technology and using currency manipulation to sell it at rock bottom prices. Maybe, just maybe, we should consider supporting all our manufacturing sectors, and not just the ones who contribute to the Obama campaign.

    This was never about solar technology. The conservative bloggers who brought up Solyndra were making the point that green energy was full of risky ventures, not that solar technology makes you a liberal weenie. But this particular story is about how Obama supporters were able to 1.)get a loan guarantee for a process that the government warned would fail at about the exact time at which it did fail, 2.)Get more money that almost any other single green energy manufacturer, 3.)Get a lower interest rate than any other of this type of loan and 4.)Allowed by the administration to renegotiate their loan so that they could get another creditor by putting them first in the receivership payback list instead of the government.

    And even if one believed this about green energy, what about Gibson guitars? They were told they need to fire everyone in the US and make part of the guitar in India. Their competitor uses the same Indian wood but they contributed to Obama. What’s Nocera’s excuse for that?

  7. yttik says:

    I think it’s a great idea. I think when we invest taxpayer money, the people, the government, should profit. The problem is, this is the government we’re talking about. Turn them into a big for profit group and all you’ve got is a giant state corporation. You think people have no power now, just wait until our government is THE corporation.

    • 1539days says:

      That’s why I come back to the new no interest green energy loan. Give a homeowner the opportunity to put in the alternative energy of their choosing and pay the government back monthly like a utility bill. It only costs the interest on a loan and we could have outfitted 20,000 homes with that wasted Solyndra money.

      • yttik says:

        I like that idea. I’d put solar in if I could make payments to the Gov on it every month like you do a utility bill. But I think the threat of crony capitalism would pop up there, too. If people go solar, utility companies get no revenue, so they’re going to want some of that money you’re paying back to the Gov. Then they’ll hire some lobbyists and it’s all downhill from there. We’ll be borrowing taxpayer money to put in our solar panels and actually paying it back to utility companies and solar factories who will use it to buy themselves a congresscritter and before you know it, the Gov will be claiming the program is running out of money and they need to raise taxes. It’s like a vicious circle sometimes.

  8. DeniseVB says:

    Good thoughts on “moneyed interests” causing greed and corruption, not capitalism.


    Not that anyone noticed, but a pack of naïve college students and aging hippies trying to recapture their youth descended upon Wall Street last weekend. They targeted the ubiquitous villains, “Greed” and “Corruption” wishing to demolish a system unfairly favoring the “Rich.”

    I agree.

    Not with ousting capitalism, but implementing it. Washington ought to cease its incessant interventions, which betray the ideals of freedom and markets. Far too much collusion links Washington and Wall Street coddling those Jefferson deemed “moneyed interests.” Wealth shouldn’t manipulate government. It’s an abomination.

  9. DeniseVB says:

    Lack of cohesion among the Wall Street protestors seems to have muddled their message.


    One day, a trader on the floor of the New York Stock Exchange, Adam Sarzen, a decade or so older than many of the protesters, came to Zuccotti Park seemingly just to shake his head. “Look at these kids, sitting here with their Apple computers,” he said. “Apple, one of the biggest monopolies in the world. It trades at $400 a share. Do they even know that?”

    • yttik says:

      This really bothers me. We have protestors where I live that don’t seem to have any idea what they’re protesting. They’re like walking talking points who can’t form two sentences about the issues they’re protesting. It’s kind of scary actually.

      • Mary says:

        True. Many of them don’t even realize things like if you raise cap gains taxes on dividends and interest, it’ll affect their own 401K’s, state pension funds, etc. , and in the end , the middle class and senior citizens will be living on even LESS.

        -Warren Buffet CHOSE not to take a salary, and to take his pay based on low cap gains tax. Using his secretary to cloud the issue is a cop out. And some of those young kids don’t even understand that.

  10. Here’s an idea. What if tax payer money were used to innovate and develop new things, do new research, explore things that the commercial world won’t do because it’s too hard, requires too much time, is too risky. That’s especially true of basic scientific research. But also true with things where you need to try lots of things before you hit upon one that works like with energy research, medicine, etc.

    But, and here’s the catch, if all that tax payer money spent to help us all figure out new stuff, resulted in things that were useful, patentable, etc., then since we paid for it, we, the taxpayers, own it. That is, what’s developed is public. And anyone can they use what’s discovered to make products, etc.

    So no government loans. No government venture funding. Instead grants for basic research. If your lab can figure cool stuff out, you can get a grant and work on these things. If instead you’re a business that wants to pick up where the government research left off, more power to you. Get a regular loan, get venture money, or, perish the thought, grown your business by bootstrapping it yourself by starting small and slowly building.

    There’s still room for some tax payer incentives and assistance in areas that we know we need to pursue for the common good that just isn’t happening otherwise. Perhaps solar is one of those areas. But if you get such government assistance, it should come with all kinds of strings attached and oversight such that the executives can’t take a piss without everyone knowing what they drank.

    • Three Wickets says:

      Makes sense. The usual way government makes its money back is when subsidized new science turns into viable new ventures, businesses and industries which create jobs and wages which generate govt revenue. The idea of more direct govt equity stake in early science and development (as per crawdad’s post) is interesting…similar to what venture capital and some private equity firms do, collect investors, and back new venture and sectors. Though most of the venture and private equity types don’t like investing in the really early basic science and development work. The return ratios are too low, they like proven cases and solutions to take to market. Believe some of those other investors in Solyndra were private equity…possibly unethical ones from what’s coming out now.

  11. Three Wickets says:

    OT good read. Why Small Businesses Aren’t Innovative About how most small businesses in the country aren’t primarily about innovation and the newest thing in venture capital. Their success depends on basic factors like market demand, cost of capital, regulation – where policymakers can help.

    The bulk of small businesses being created, in short, are not particularly innovative ones. Few spend any money on research or development, getting a patent, or otherwise trademarking a new idea. Most simply help provide already-crowded markets with familiar goods such as legal work or gas or nearby groceries. Nor are they growing businesses either. “[M]ost surviving small businesses do not grow by any significant margin,” the economists write. “Most firms start small and stay small throughout their entire lifecycle.”

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